Change Order: Canada’s Spring Economic Update 2026 Sets A New Federal Infrastructure Agenda

Background

On April 28, 2026, the federal government released Canada’s Spring Economic Update 2026 (the “ Update ”), continuing the “Build Canada Strong” agenda first set out in Budget 2025. The Update projects a deficit of $66.9 billion for 2025-26, an improvement of approximately $11 billion from the $78.3 billion projected in Budget 2025, signaling that the government is committing to a materially expanded infrastructure agenda while simultaneously narrowing the fiscal gap. The Update is notable both for the scale of capital it commits – anchored by a new $25 billion sovereign wealth fund, the Canada Strong Fund – and for the structural changes it makes to how federal infrastructure investment is organized and deployed. This bulletin summarizes the key announcements relevant to infrastructure sponsors, lenders, contractors, institutional investors and Indigenous partners. Tax measures (including the expanded CCUS Investment Tax Credit and accelerated capital cost allowance rates for low-carbon LNG) are addressed in a separate bulletin.

The Expanded Federal Financing Stack

A headline financing in the Update is the creation of the Canada Strong Fund (the “ announcement Fund ”), Canada’s first sovereign wealth fund. The Fund will invest commercially in strategic Canadian projects and companies alongside private capital, with an initial government endowment of $25 billion over three years on a cash basis. The Fund will operate as an arms-length Crown corporation focused primarily on minority equity positions alongside private capital, and a retail investment product will allow individual Canadians to invest directly in the Fund. A dedicated Transition Office will be established to engage market participants and regulators on the Fund’s design. Further details on the Fund can be found in our bulletin here .

The Canada Strong Fund joins an existing suite of federal financing vehicles (including the Canada Infrastructure Bank (“ CIB ”), Canada Growth Fund, Canada Indigenous Loan Guarantee Corporation (“ CILGC ”) and Export Development Canada (“ EDC ”)) that are already active in the major project financing space. To ensure clarity of purpose and avoid duplication across this ecosystem, the government has committed to comprehensive mandate reviews for each of these organizations.

For project proponents and investors, the practical involvement is a deeper and more coordinated federal financing stack for major projects, and early engagement across all relevant federal financing counterparts will be increasingly important for major project sponsors.

CRA Priority Treatment for Nation-Building Projects

The Update announces that the Canada Revenue Agency will prioritize advance income tax rulings related to large-scale, nation-building projects such as housing and infrastructure, as well as investments that enhance productivity and strengthen critical sectors, including projects potentially benefiting from clean economy investment tax credits. For major project sponsors, this is a meaningful practical benefit: advance rulings can provide binding tax certainty before significant capital is committed, and the historically long lead times for obtaining such rulings have been a source of project risk. Sponsors should consider initiating advance ruling requests early in project planning to take advantage of this prioritization.

Trade, Transportation and Supply Chain Infrastructure

The Update confirms the government has committed $6 billion to Canada’s Trade Infrastructure Strategy, described as a “generational” investment to strengthen infrastructure connecting Canada to global markets. This includes the $5 billion Trade Diversification Corridors Fund to build and modernize ports, railways, airports, bridges and highways, and the $1 billion Arctic Infrastructure Fund to support critical Arctic transportation infrastructure (including airports, ports, all-season roads and highways) with dual civilian and military applications. Northern projects referred to the Major Projects Office (the “ MPO ”) are intended to strengthen all-season transportation networks, improve connectivity, lower costs, enable resource development and support Indigenous economic participation.

The Update also announces Canada’s first Investment Summit in September 2026, focused on attracting $500 billion in private investment over five years, with priority sectors including energy and critical minerals, artificial intelligence, defense and infrastructure. A Sustainable Finance Conference is also planned for the coming year, to be hosted by the Canadian Climate Institute, which will bring together domestic and international stakeholders to promote progress on a made-in-Canada sustainable investment taxonomy and discuss sustainable investment opportunities in Canada.

For participants in transportation, logistics, ports, airports, roads and bridges, the Trade Infrastructure Strategy represents a material and near-term source of procurement and funding opportunity. Contractors, engineers and developers with strength in these asset classes will be keenly monitoring federal tender activity and engagement processes under both the Trade Diversification Corridors Fund and the Arctic Infrastructure Fund. The Investment Summit in September 2026 may also present opportunities for private capital seeking to co-invest alongside federal programs in trade-enabling infrastructure.

Airports: A Reform Workstream with Material Structural Implications

Airport infrastructure receives significant policy attention in the Update. The government is pursuing reforms to modernize airport authority governance, explore options to update airport rent frameworks, increase airports’ capacity for reinvestment in infrastructure, and assess alternative ownership models to “unlock the full value of airports.” The language around “alternative ownership models” is deliberately non-committal and does not signal a specific direction toward privatization; rather, it reflects an early-stage policy exploration that will be advanced with input from airport authorities, airlines and local governments. For further details please see our related bulletin here.

In the North, the Update specifically notes that the Arctic Infrastructure Fund will support modernization of the Rankin Inlet and Inuvik airports to accommodate larger aircraft and enable faster, more affordable year-round civilian and military access.

The airport reform workstream warrants close attention from airport authorities, infrastructure investors and lenders with airport exposure.

Roads, Bridges and Public Transit

The Update confirms the Build Communities Strong Fund (“BCSF”) launched on April 7, 2026, with $51 billion over 10 years starting in 2026–27, plus $3 billion ongoing. The BCSF is structured in three streams: (i) a Provincial–Territorial Stream ($17.2 billion) covering housing-enabling and education-related infrastructure including water/wastewater systems and roads ($12.2 billion) and health infrastructure ($5.0 billion over three years); (ii) a Direct Delivery Stream ($6.0 billion) for regionally significant projects, large building retrofits, climate adaptation and community infrastructure; and (iii) a Community Stream ($27.8 billion over 10 years plus $3 billion per year ongoing) covering public transit, recreation facilities, fire halls and broadband. Under the BCSF, jurisdictions with the highest development charges will be required to reduce them for three years as a condition of federal funding.

With the BCSF now live, federal funding flows for roads, transit, water and wastewater, and community infrastructure are available. The scale of the program ($51 billion over 10 years plus $3 billion per year ongoing) represents a substantial and sustained pipeline of design and construction work across multiple asset classes. Direct Delivery Stream projects, which require proponents to seek private capital or financing from the Canada Infrastructure Bank before accessing federal funding, may present particular opportunities for P3 or alternative financing structures depending on project scale and provincial or municipal appetite.

Energy and Power Infrastructure Policy

The Update states that clean, affordable and dependable electricity is central to long-term economic strength, that electricity demand is projected to rise materially, and that the government will soon release a discussion paper on working with provinces, territories and Indigenous partners to connect, modernize and expand the grid. The government will also soon release a Nuclear Energy Strategy to provide a coordinated federal perspective on the sector’s future development, expected to set the federal framework for new builds, small modular reactors and nuclear waste management, all of which have major capital, regulatory and financing implications.

The discussion paper on grid connectivity and the forthcoming Nuclear Energy Strategy will together shape the federal framework for some of the largest capital programs in the country (including new nuclear builds, small modular reactors and major transmission expansions). Nuclear developers, transmission owners, grid operators, utilities and their lenders and investors should engage actively in the discussion paper process and monitor the Nuclear Energy Strategy closely when released.

The Update’s list of projects referred to the MPO includes electricity projects such as the Darlington New Nuclear Project (Ontario Power Generation), the Iqaluit Nukkiksautiit Hydro Project, the North Coast Transmission Line (BC Hydro), and the Taltson Hydro Expansion (Government of Northwest Territories).

Oil and Gas Infrastructure: Tax Incentives

The Update contains significant tax incentive measures for oil and gas infrastructure, including the expansion of the Carbon Capture, Utilization and Storage (“CCUS”) Investment Tax Credit to enhanced oil recovery (“EOR”) as an eligible use of captured CO₂, and implementation details for accelerated capital cost allowance rates for low-carbon LNG facilities. These measures are addressed in detail in our separate tax bulletin. Industry participants with exposure to CCUS, EOR or LNG capital expenditure programs should consult that bulletin for a full analysis of credit rates, eligibility conditions, jurisdictional designation requirements and project finance implications.

By way of context, the Update notes that LNG Canada Phase 1 began exporting in June 2025, with LNG exports rising to 7.5% of total natural gas exports, and that other LNG projects across the country represent over $150 billion in potential capital investment in British Columbia plus more than $50 billion in other regions. The Trans Mountain Expansion Project has been fully operational since 2024, with the share of crude exports to non-U.S. markets rising from less than 3% to roughly 10%. These developments underscore the structural shift in Canadian export infrastructure that frames the ongoing policy conversation about additional LNG and pipeline capacity.

The Update also designates the Electric Vehicle Affordability Program (the “EVAP”) as a prescribed program under the Income Tax Regulations, effective February 16, 2026. As a result, businesses will not be permitted to claim both an EVAP rebate and immediate expensing for the same electric vehicle, consistent with the tax treatment applicable under the former Incentives for Zero-Emission Vehicles program (i.e. a vehicle in respect of which an EVAP rebate is claimed cannot also be a designated immediate expensing property (“DIEP”) under the DIEP rules). Infrastructure participants involved in fleet electrification or electric vehicle charging network deployment should consider the interaction between the EVAP designation and available capital cost allowance incentives (including the DIEP rules) when structuring their capital expenditure programs.

Indigenous Infrastructure and Investment

The Indigenous Loan Guarantee Program – now administered by the CILGC – has been expanded from $5 billion to $10 billion with eligibility beyond energy and natural resources. Since Budget 2025, the program has completed two material transactions: a $400 million guarantee (May 2025) supporting 38 First Nations in British Columbia acquiring a 12.5% stake in Enbridge’s Westcoast pipeline system, and a second guarantee supporting two First Nations in Ontario acquiring nearly a 20% equity stake in Hydro One’s Chatham to Lakeshore transmission line.

Northern and Arctic Infrastructure

The Update links Arctic transportation infrastructure such as airports, ports, all-season roads and highways, together with Northern projects referred to the MPO, with strengthening Northern communities and explicitly references Indigenous economic participation as an objective. As noted above, the Arctic Infrastructure Fund specifically supports modernization of the Rankin Inlet and Inuvik airports to accommodate larger aircraft and enable faster, more affordable year-round civilian and military access. The federal policy direction is clear: Northern and Arctic infrastructure projects are expected to incorporate Indigenous economic participation (including equity participation) as a design feature from the outset, with the CILGC available to support Indigenous equity in Northern projects.

Defence Industrial Policy and Defence Investment Agency (“DIA”)

The Update proposes $103.8 million over five years, starting in 2026-27, to establish the DIA as a stand-alone entity with expanded authorities under the Defence Production Act, supported by enabling legislation to be introduced. The DIA, which was launched in October 2025 as a Special Operating Agency within Public Services and Procurement Canada, is responsible for re-equipping the Canadian Armed Forces and driving economic benefits through the government’s generational defence investment program.

Regulatory and Approvals Reform – One Project, One Review

The Update states the federal government is advancing “one project, one review” by negotiating cooperation agreements with provinces and territories to minimize duplication and accelerate assessments, with agreements finalized with Ontario, New Brunswick, Prince Edward Island, Alberta, Manitoba and Nova Scotia, and additional agreements under discussion. These cooperation agreements can provide for substitution to a single harmonized process drawing on the best available provincial and federal expertise. The Update is explicit that cooperation agreements do not affect the duty of proponents, provinces, territories and the federal government to fully consult with Indigenous peoples whose rights may be affected. The government is also developing measures to achieve all federal decisions on major projects within a maximum of two years, down from a prior five-year target.

For proponents in provinces with finalized agreements, the immediate priority is to understand how the single-review model operates in practice, and in particular, how the duty to consult and accommodate Indigenous peoples is discharged within the streamlined framework. While the administrative process is streamlined, the substantive consultation obligation remains intact and continues to be a source of project schedule risk that proponents must plan for carefully. The two-year maximum decision timeline, if achievable, would represent a significant improvement in regulatory certainty for project finance purposes, where lenders typically require defined approval milestones as conditions precedent to drawdown.

The Major Projects Office Update

The Update states that, as of March 12, 2026, the MPO has announced 15 projects representing over $125 billion in capital investments and is developing six “transformative strategies,” including four projects developed out of the former Arctic Economic and Security Corridor strategy. The Update positions the MPO as the vehicle to advance nation-building projects faster and more responsibly, while respecting environmental responsibilities and the rights of Indigenous people.

For further background on the Major Projects Office please see our prior bulletins here.

Competition and Procurement

The Update introduces a suite of measures that will affect how federal infrastructure and defense procurement is structured and priced. The Update launches a Whole-of-Government Competition Plan to ensure that existing and future federal policies, from regulation, procurement to industrial support, prioritize competition and limit, to the extent possible, any inadvertent negative impacts on competitive markets. Further details are to be provided by the Minister of Finance and National Revenue in the coming months. This is complemented by the launch of the Federal Contracts Review of the largest-value federal contracts, with the government committing to pursue “the best price” rather than merely “a good price,” supported by global benchmarking and a Team Canada approach that combines the buying power of federal, provincial and territorial governments.

Conclusion

Canada’s Spring Economic Update 2026 reflects a deliberate government and structural shift in the federal’s role in Canadian infrastructure: from grant-maker and regulator to active co-investor, equity partner and project accelerator. The breadth of the measures (spanning a new sovereign wealth fund, a $51 billion community infrastructure program, a $6 billion trade infrastructure strategy, an expanding MPO pipeline, two completed Indigenous loan guarantee transactions and a commitment to two-year federal decision timelines) all evidence material progress in the government’s initiatives.

For builders, financiers, Indigenous partners and other participants in the Canadian infrastructure industry, the Update represents the potential to substantially expand and accelerate the project pipeline, with new delivery mechanisms and financing tools that will reshape how major projects are structured, financed and delivered for years to come. Industry participants will be watching closely for further details on implementation as the government moves to translate these commitments into procurement, regulation and transaction activity.

The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.

© McMillan LLP 2025